Also, leading big on the eve of the New Hampshire primary. The front-runner, Mitt Romney, says he likes being able to fire people. It's not exactly what Romney meant, but his rivals are taking full advantage. I will speak with a key Romney supporter, the last GOP presidential nominee, Senator John McCain. That's live this hour.

And the next battleground is South Carolina, where a super PAC is spending millions of dollars to flood the airwaves there with anti- Romney attack ads. Is this payback time for Newt Gingrich?

I'm Wolf Blitzer. You're in THE SITUATION ROOM.

President Obama dropped a bit of a bombshell a little while ago. In an unscheduled appearance, he announced that the White House chief of staff Bill Daley is stepping down after just a year. He will be replaced by the budget director, Jack Lew.

Let's go straight to our chief White House correspondent, Jessica Yellin. She's working the story for us.

Jessica, what's going on over here?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Well, Wolf, first of all, the president actually said that Bill Daley wants to spend more time with his family. Let's listen to part of what the president had to say and then we will talk about it a little bit on the back end. Here's the president.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Obviously, this was not easy news to hear and I didn't accept Bill's decision right away. In fact, I asked him to take a couple of days to make sure that he was sure about this.

But in the end, the pull of the hometown we both love, a city that's been synonymous with the Daley family for generations, was too great.

(END VIDEO CLIP)

YELLIN: So what's this about?

Wolf, as you know, this has been a fraught relationship from the start. Daley has been here for almost exactly one year and there have been management challenges in the White House. Another issue, the top priority for which Daley was brought into address, repairing the White House's relationship with the business community, no longer became as important to this White House when the campaign decided that the president's top focus would be on reaching out to the middle class and fighting for consumers. So that's another issue.

But then, of course, the number-one, the overarching challenge here has been there's so many senior advisers here who are insiders going back to the campaign. And it's just incredibly difficult this shows to break into that club and there were clashes and challenges as we have reported throughout the year.

And in the end, senior administration official made it clear to me that this was Daley's decision. And as the president said, Daley came to him first last Tuesday, and said, Mr. President, I decided in the end, it's just not right. This White House is going to be better off if I'm not the chief of staff. The president said no, no, think about it. As he said, Daley came back and said, no, I have decided. Really, I need to tender my resignation.

And it was decided that -- and then the president asked Daley who he thought would be best to replace him, according to this administration official, Wolf.

BLITZER: A dreary day in Washington. It looks like some snow is beginning to come down. Jessica, we will get back to you and learn more about Jack Lew, Jack Lew in, Bill Daley out. Stand by.

We're hours away from the nation's first primary. On the eve of that vote in New Hampshire, the front-runner, Mitt Romney, is drawing new fire from his rivals. They're fighting for second place and trying to stay in this presidential race.

Romney has given them, today, some new ammunition.

CNN's Jim Acosta is joining us right now.

Romney under fire right now for talking about firing people. Jim, what's going on here?

JIM ACOSTA, CNN CORRESPONDENT: That's right, Wolf. Mitt Romney has had a couple of stumbles in the last 24 hours over the issue of layoffs. And while the comments may not hurt him here in New Hampshire where he's way out in front, they could haunt him down the road.

(BEGIN VIDEOTAPE)

ACOSTA (voice-over): Touring a metalworks factory for votes, Mitt Romney has seen the financial days before the New Hampshire primary manufacture nothing but trouble.

At a breakfast event Romney used an unfortunate choice of words in touting the health care plan he passed in Massachusetts.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I want individuals to have their own insurance. That means the insurance company will have an incentive to keep you healthy. It also means that if you don't like what they do, you can fire them.

I like being able to fire people who provide services to me.

ACOSTA: It didn't take long for the rivals to pounce, starting with Jon Huntsman.

ACOSTA: Asked about his comments, Romney complained his words were being misconstrued.

ROMNEY: I was talking about insurance companies. We like to be able to get rid of insurance companies that don't give us the service that we need.

UNIDENTIFIED MALE: Mitt Romney, them guys, they don't care who I am.

ACOSTA: But the remarks come as a pro-Newt Gingrich super PAC is unleashing a 30-minute documentary that focuses on Romney's days as the head of the private investment firm Bain Capital, which created some companies, but also downsized others.

UNIDENTIFIED FEMALE: That hurt so bad to leave my home because of one man that's got 15 homes.

ACOSTA: And over the weekend, Romney told a crowd he knew what it was like to fear for his job, despite his privileged upbringing, as the son of George Romney, a former car company president, governor, and one-time presidential candidate.

ROMNEY: I know what it's like to worry whether you're going to get fired. There were a couple of times I wondered whether I was going to get a pink slip.

ACOSTA: Looking ahead to the next primary down in South Carolina, Rick Perry couldn't resist.

"I have no doubt Mitt Romney was worried about pink slips," Perry said, "whether he was going to have enough of them to hand out."

Romney said he was only talking about how he worked his way up from the bottom in the business world.

ROMNEY: Like anybody that starts at the bottom of an enterprise, you wonder when you don't do so well whether you are going to be able to hang on to your job. ACOSTA: Democrats are also piling on. Back at that breakfast event a woman from the United Auto Workers union challenged Romney on his opposition to the General Motors bailout. Romney stood by his comments.

ROMNEY: I believe the market works better than a president stepping in to take care of his friends.

ACOSTA: When we tried to talk to the woman, the Romney campaign's soundman cranked up the music, cutting her off. As we tried to catch up with the soundman he threw a sheet over his head.

(END VIDEOTAPE)

ACOSTA: And the barrage of attacks on Mitt Romney has caught the attention of the pro-Romney super PAC Restore Our Future. The same PAC that took down Newt Gingrich in Iowa has plans to spend more than $2 million down in South Carolina to talk up Mitt Romney's accomplishments. PACs can do their dirty work for the candidates, Wolf, but they can also do some damage control as well and we may be seeing that down in South Carolina, Wolf.

BLITZER: I'm always amazed at how ridiculous some of these people are. They think they can pump up the music, avoid the sound. We will hear what the woman has to say. Why do they do ridiculously stupid things like that out there on the campaign trail?

ACOSTA: Well, the Romney campaign is all about message control and it's all about message discipline. That's why you don't see the former Massachusetts governor doing a whole lot of media avails.

The one that he did today was the first one that he had done in more than a week according to a lot of the reporters who cover his campaign hour by hour, day by day. So when he gave that one news conference, he only took five or so questions, even at the news conference that he held today here in New Hampshire. So this is really all about message control.

It was surprising, though, being in that room. We were all just trying to talk to this woman about her comments about General Motors and the bailout and it was right in the middle of those comments when that music went full blast. And it could only have been the reason of the Romney campaign trying to drown out this woman's comments. We tried to go over to the sound technician and ask him did the campaign put you up to this and he said to us, Wolf, check with the campaign.

BLITZER: They always do these ridiculous things and it always comes out and then we move on and we learn. I'm sure they have learned from this as well. Thank you very much, Jim Acosta. Good reporting.

The next battleground is South Carolina. If Mitt Romney wins there, his rivals could be in huge, huge trouble. Newt Gingrich has been going after Romney with a vengeance. Now a pro-Newt Gingrich super PAC has reportedly received $5 million from the casino executive Sheldon Adelson. That group has spent millions of dollars on attack ads ready to air in South Carolina.

They are excerpted from a film critical of Romney's record as CEO of Bain Capital.

Watch this.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The story of greed, playing the system for a quick buck. A group of corporate raiders led by Mitt Romney. More ruthless than Wall Street. For tens of thousands of Americans, the suffering began when Mitt Romney came to town.

(END VIDEO CLIP)

BLITZER: Let's go live to our political reporter Peter Hamby.

He's in Greenville, South Carolina.

You have been covering South Carolina politics for a long time -- $3 million, $5 million, what does that buy within the next less than two weeks if you're looking for a lot of commercial time over there?

To put this in perspective, a campaign typically, if they want a healthy statewide ad on broadcast and cable in South Carolina, will spend anywhere between $300,000 and half a million. When you talk about $3 million, $2 million, $5 million, that far surpasses what campaigns typically see.

I talked to one Republican strategist here today and I was kind of picking his brain about how many commercials he would see and he told me that this would put Geico to shame. That's the amount of super PAC commercials we will see from this pro-Newt Gingrich super PAC, if they put in $3.4 million hammering Romney on Bain.

BLITZER: It's almost payback, because the pro-Romney super PAC, they killed Newt Gingrich in Iowa when I was there. You couldn't turn on the TV without seeing an attack going after Newt Gingrich and it really paid off. These ads right now, what are you seeing on television as we speak? Because I know you have been watching what the ads are right now.

HAMBY: I have been down here in South Carolina for about a week and it's almost starting to remind me when you watch television of that final week in Iowa when you couldn't turn on the TV without seeing a political ad.

So far, I have seen the Romney up with a heavy, heavy buy with a positive ad calling the need to cut spending a moral responsibility. There's a negative Ron Paul ad calling Rick Santorum a Washington insider. There's a Rick Perry ad that is positive ad talking about values. A Gingrich campaign ad that is criticizing Romney on his tax plan. Those are already flooding the TV airwaves just from watching television over the last few days.

So when the super PACs come in it's going to be nonstop for almost two weeks until the January 21 primary, Wolf.

BLITZER: Rick Perry, he got out of New Hampshire as quickly as he possibly could. He will probably come in dead last, the polls show, maybe 1 or 2 percent in New Hampshire. He's in South Carolina right now and that's presumably his last stand, to see how he does in South Carolina. He really hammered Mitt Romney in person today, didn't he?

HAMBY: He really did, Wolf. This is his last stand. He's planting a flag here and kind of moving through the conservative upstate and talking about his faith and his conservative values.

But you really see this Bain attack in the last 24 hours emerging as a common theme among all the candidates. Huntsman was hitting Romney out today in New Hampshire. And Perry earlier today in Anderson drilled Mitt Romney on this and he said that he looted with Bain several companies located here in South Carolina. He really tried to localize it.

And he said that Romney was profiting off failure. So it's an interesting attack in a Republican primary. The Romney campaign is defending this saying that these other Republicans are attacking the private sector and they sound like Democrats. But this is a state that's lost a lot of jobs, a lot of manufacturing jobs, a lot of textile industry jobs and the unemployment rate is almost 10 percent here.

So it could be a potent theme hitting the sort of Wall Street corporate-raider mentality in the state where there's a lot of populist frustration with the tough economy, Wolf.

BLITZER: Did Rick Perry, Peter, mention the tens of thousands of jobs that Bain Capital helped to create at Staples, Domino Pizza, some other companies? I take it he probably didn't mention that, did he?

HAMBY: Curiously, that went unmentioned today, Wolf. But maybe he will say it here at Stax's Restaurant here in Greenville in a few minutes.

BLITZER: He will probably say that if he drops out Romney gets the nomination. Then he will start talking about the tens of thousands of jobs that Bain Capital created. I suspect that will happen at some point down the road.

Peter, doing an excellent job for us in South Carolina.

The debate over debates. Is it time for a change? Jack Cafferty is next with "The Cafferty File."

Also, John McCain, the Republican presidential nominee the last time around, is backing Mitt Romney. I will ask Senator McCain about the escalating attacks on his candidate. Plus, a bungee jump disaster. The cord snapped, but the jumper lived to tell the story -- that and a look at the day's other top stories and a lot more news coming up right here in THE SITUATION ROOM.

(COMMERCIAL BREAK)

BLITZER: Let's go right to Jack Cafferty with "The Cafferty File" -- Jack.

JACK CAFFERTY, CNN ANCHOR: Thanks, Wolf.

There's a growing debate about the debates and rightly so. An ever-louder chorus of voices now suggesting the presidential primary debate process has gotten out of hand and needs to be reined in.

I couldn't agree more. So far, there have been at least 15 debates among the Republican presidential wannabes, including two in a 12-hour period over this past weekend and there are more to come.

Republican strategist Mark McKinnon writes in the "Daily Beast" that the primary debate process has, quote, "gone rogue." He suggests the media took complete control away from the parties and the candidates and that the focus of the debates now is on entertainment and eyeballs, his words. McKinnon said, as there are more and more debates, there's less and less time for the candidates to go out and talk directly to the voters on the campaign trail.

And he also criticizes the format where the moderators of the story, questions are meant to spark conflict and some of the questions are downright silly. And serious questions are limited to 60-second solutions and 30-second rebuttals. Plus, since media outlets can decide which candidates participate, they effectively handicap the candidacy of those who are not allowed in.

McKinnon suggests the Republican National Committee, the Democratic National Committee should get together and agree before 2016 to some guidelines for their primary debates. Several top Republicans agree the party needs to take more control over the process but not everybody's on board with that idea. For example, the lower-tier candidates stand to benefit from more debates because it's free air time for them. Candidates like Newt Gingrich and Herman Cain spiked in the polls following their debate performances.

And news organizations have been getting big ratings from many of these debates, suggesting there's an ongoing appetite for them.

Anyway, here's the question -- how would you reform the political debate process? Go to CNN.com/CaffertyFile and post a comment on my blog or go to our post on THE SITUATION ROOM's Facebook page -- Wolf.

BLITZER: Less political in the regulation, I say. Let the free process go forward. If people like those debates and if they're interesting and they are, let them have all the debates they want. The more the merrier. That's just me, Jack, as far as I'm concerned.

CAFFERTY: But you're opinion matters. You're one of the foremost political debate moderators in this land.

BLITZER: Well, then, I love moderating those debates.

CAFFERTY: I know you do and you do a good job.

BLITZER: They always learn a little bit more about the candidates and they get more informed about what's going on. So, that's good. I say the more, the merrier.

CNN is getting a first-hand look at what's going on right now in Syria. Lisa Sylvester is monitoring that and some of the other top stories in THE SITUATION ROOM right now.

Lisa, what do you have?

LISA SYLVESTER, CNN CORRESPONDENT: Hi there, Wolf.

Well, CNN senior international correspondent Nic Robertson is on the ground in Syria. He said thousands of people gathered for funerals today in Damascus, many chanting, "Down with the regime of Bashar al-Assad." But there was also a pro-government rally in Damascus. Robertson and his crew had their live broadcast equipment confiscated on arrival and they are often accompanied by a government monitor.

The former Pakistani president, Pervez Musharraf, tells CNN he's succeeded where others failed as leader of his nuclear-armed country. And he says he'll return from exile by the end of this month to run for office despite the threat of arrest. He's wanted in connection with the 2007 assassination of former Prime Minister Benazir Bhutto.

In Britain, investigators have identified the body that was found on Queen Elizabeth's Sandringham estate. They say it's a 17- year-old female immigrant from Latvia who had been missing since last August. They're not revealing the cost of death, but the case is being treated as a homicide.

And take a look at these injuries. This is what happened to a young Australian woman who was bungee jumping in Africa when the bungee cord broke. Erin Langworthy plummeted more than 300 feet into a crocodile-infested river, breaking a collarbone and blacking out on impact.

Amazingly -- look at this picture here. She survived and she is expected to fully recover. I'm watching this video along with everyone else. That is unbelievable. And she survived and she's expected to be just fine, Wolf.

BLITZER: That's why I will never, ever, ever bungee jump. I don't know about you Lisa, but that's something I have no desire to do.

SYLVESTER: Yes, cross that off my list. Not doing that one.

BLITZER: Thank God she's all right. You know what? That's a dangerous thing to do. I wouldn't do it.

All right. John McCain, he's backing Mitt Romney -- standing by to talk to us live about the attacks on his candidate by the new super PAC supporting Newt Gingrich.

Plus, the surprisee departure of President Obama's White House chief of staff. We'll talk about that and much more. Donna Brazile and Mary Matalin, they are also standing by live for our strategy session.

(COMMERCIAL BREAK)

BLITZER: Jon Huntsman rolled the dice on New Hampshire. And now with the primary only hours away, will his bet pay off?

Let's go live to New Hampshire. CNN's Dan Lothian is standing by.

Dan, what's going on as far as Jon Huntsman is concerned?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: Well, first of all, Wolf, I'm inside a bakery where Jon Huntsman just wrapped up his fourth event of the day. It's here in Nashua, New Hampshire.

If you take a look at the most recent polling, he has been moving up a bit, but he understands there's a lot of work to be done in these final hours. That's why he's been crisscrossing the state and going after the frontrunner, Mitt Romney.

LOTHIAN (voice-over): Fighting to close the deal with voters and close the gap with his opponents, former Utah Governor Jon Huntsman portrayed himself as the underdog as he rolled across the Granite State scheduling seven campaign events.

HUNTSMAN: We've got a terrific grassroots organization in this place all over the state. They're excited and they're fired up and we're moving.

LOTHIAN: Huntsman couldn't pass up the classic political photo op at a cafe in the town of Henniker. But no kid gloves for frontrunner Mitt Romney as he quickly pounced on comments the former Massachusetts governor made about firing health service providers who don't cut it.

LOTHIAN: It's the latest effort to chip away at the frontrunner. Over the weekend, questioned Huntsman's conservative credentials during NBC's "Meet the Press" debate.

HUNTSMAN: He criticized me, while he was out raising money, for serving my country in China -- yes, under a Democrat, like my two sons are doing in the United States Navy. They're not asking who -- what political affiliation the president is.

I want to be very clear with people here in New Hampshire and this country, I will always put my country first.

LOTHIAN: Huntsman hammered that theme at every stop.

HUNTSMAN: I'm willing to put my country first, as compared to and contrasted to Mitt Romney who wants to put politics first.

LOTHIAN: Sensing it has caught on --

CROWD: Country first, country first!

LOTHIAN: And at this stop in Concord, supporters insisted Huntsman's job under President Obama was not a liability.

JIM WADDELL, HUNTSMAN SUPPORTER: You know, the ambassador serves the country, not necessarily the president.

JOY POTTER, HUNTSMAN SUPPORTER: I think that that shows that he can work with the other party. I think that's a good thing right now.

(END VIDEOTAPE)

LOTHIAN: Now, the Huntsman campaign also released a new TV ad today paid for with money the campaign says that they were able to raise over the weekend. Of course, the target of that ad? Mitt Romney -- Wolf.

BLITZER: Dan Lothian on scene for us, thanks very much. By the way, in the next hour, we'll speak live with three of Jon Huntsman's daughters. They'll be standing by -- Liddy, Abby and Mary Anne. We'll talk to them about their dad.

BLITZER: He was the Republican presidential nominee in 2008. Now Senator John McCain is backing in the Republican effort to unseat President Obama.

Senator McCain is joining us now live from Capitol Hill.

Senator, always good to have you.

Let's talk politics for a little while, because these pro-Newt Gingrich super PACs, if you saw a report from South Carolina, they are going after Mitt Romney with a vengeance right now. I'm going to play a little clip for you, because it's getting really, really ugly, Republican on Republican.

Watch this.

(BEGIN VIDEO CLIP FROM CAMPAIGN AD)

UNIDENTIFIED MALE: Mitt Romney became CEO of Bain Capital the day the company the day the company was formed.

His mission?

To reap massive rewards for himself and his investors.

Mitt Romney and them guys, they don't care who I am.

UNIDENTIFIED FEMALE: he's for small businesses?

No, he isn't. He -- he's not.

UNIDENTIFIED FEMALE: And that hurt so bad, to leave my home, because of one man that's got 15 homes.

(END VIDEO CLIP)

BLITZER: Wow!

All right, that's pretty tough. But if you turn on a TV station in South Carolina, you're seeing that all the time right now.

Senator, what do you think about that?

SEN. JOHN MCCAIN (R), ARIZONA: Well, I think it's -- part of it is symptomatic of primaries, which are always tough and sometimes even more personal in the attacks than the general election are. But it's also, Wolf -- and you and I have discussed this on the past, a result of the worst decision, I think, at least in the last 50 years or so, of the United States Supreme Court, called Citizens United, called Citizens United, where they basically unleashed, without transparency, without accountability, huge amounts of money that are from the so- called independent campaigns, which you and I know are not independent.

And it has unleashed this flood of money. News reports are a wealthy casino owner in Las Vegas has written five million dollar checks or so. I don't blame them for doing that, because it's now the -- the -- the system under which we operate, which leads to this kind of campaigning and will lead to corruption and scandals, I guarantee it. When you have that much money washing around campaigns, there will be scandals.

And, by the way, I noted this morning that no candidate has applied for matching funds.

Why should they when we have all of this unaccounted for money washing around political campaigns. BLITZER: And, you know, when I was in Iowa, you know, a couple of weeks ago, you couldn't turn on a TV without seeing the pro-Romney super PACs destroying Newt Gingrich.

MCCAIN: Um-hmm.

BLITZER: And his numbers went down to -- these attack ads, based on your experience, what's going on, they work, don't they?

That -- that's why they do it, all the negative advertising?

MCCAIN: We all decry it, Wolf, but as long as it moves numbers, money will be invested in that kind of campaigning. And I'm sorry to say it, but that happens to be a reality.

Also, it has to have some basis in truth in order to, I think, have a significant effect. We'll see whether these ads have an effect on Romney in South Carolina. I kind of don't think so.

BLITZER: How worried are you, though, that this -- this internecine warfare between Republicans -- Newt Gingrich going after Mitt Romney, vice versa, that this is simply going to hurt the Republican candidate, the nominee, whoever it is, helping get President Obama reelected?

MCCAIN: I think it's a real danger and, obviously, I'd like to see it over with a Romney win in South Carolina, followed by one in Florida. But it is what it is, Wolf. And I think there will be plenty of time for our nominee to recover. But it certainly has a damaging effect.

BLITZER: Listen to Newt Gingrich go after Mitt Romney yesterday on the "Meet The Press" debate, because it got very personal.

GINGRICH: -- but can we drop a little bit of the pious baloney. The fact is, you ran in '94 and lost. That's why you weren't serving in the Senate with Rick Santorum. The fact is, you had a very bad reelection rating. You dropped out of office. You had been out of state for something like 200 days preparing to run for president.

(END VIDEO CLIP)

BLITZER: All right, if you had a chance to speak to Newt Gingrich, what would you say to him right now?

MCCAIN: I would say you're not helping yourself much, because I still think you have to give people a reason to vote for you. And I don't think that some of the language is normal to be used -- that he's using -- is normal to be used in even the most heated of campaigns.

But he's a very intelligent man, a very smart man. And he certainly I wouldn't second guess his campaign. If he thinks that's the best way to campaign, then I wish him luck.

BLITZER: Because the other day, he said Mitt Romney was a -- a liar. You heard that.

In all the years that you were out there campaigning when you were running for the Republican presidential nomination, even running, challenging Barack Obama for the presidency, did you ever call him a liar?

MCCAIN: No. No. And I've said several times that that's not something that I think is -- is language that most voters would respond to in a positive fashion. And, you know, I don't intend to analyze Newt Gingrich or anybody else, but I think there was a sense that he had, in his own words, that it was inevitable that he was going to win the nomination. And apparently now it looks like he's not. And I think that it's -- it has stung him rather badly.

But, look, I -- I lost my general election campaign, so I'm a little bit reluctant to tell people how they should campaign, except that I still believe that Mitt Romney has the experience, the background, the cali -- the qualifications, the family to lead us to victory over President Obama.

BLITZER: And what do you say to those folks, that they're using this in these campaign commercials, that, you know, a lot of people lost their jobs after Bain Capital. He was the CEO, Mitt Romney -- they took over those companies. They downsized, they outsourced and people got unemployed. This is going to be an -- a big issue, it certainly already is in the Republican contest, but I'm sure if -- if Mitt Romney gets the nomination, it will be a big issue against President Obama, as well.

How do you re--- how do you rebut that?

MCCAIN: Well, I -- I compare that with a half a billion dollars that we put into Solyndra as opposed to the $5 million they put into Staples that now hires, I've forgotten, 10,000 people or more, whatever it is. Unfortunately, in the free enterprise systems, there are winners and losers when there's competition within the free enterprise system.

When you total up what Bain Capital did, the successes far outweight -- weigh the failures. And if you're not willing to allow, as tragic as it is, for some enterprises to fail, then obviously, that is the essence of socialism. So I think when you look overall at the job opportunities that Bain provided for thousands and thousands and thousands of Americans, that they can be pretty proud of their record when you look at it overall.

Any lost job is a tragedy. Any lost opportunity is a tragedy. But when you are in in the business of the free enterprise systems, there are winners and losers. Bain Capital has a clear record of great winnings and job creation.

BLITZER: One final question and we're out of time, Senator.

What does it say to you that Bill Daley is leaving his job as White House chief of staff?

Jack Lew, the budget director, is stepping up to become the new White House chief of staff.

This sudden switch, what does that say to you?

MCCAIN: Well, obviously, I don't know the inner workings of the White House. I had a lot of dealings with Bill Daley when he was secretary of Commerce. I had some dealings with him on this latest free trade agreements.

I happen to be a great admirer of Bill Daley and I miss him and I thank him for his public service.

BLITZER: Nicely said.

Thanks very much, Senator, as usual.

Senator John McCain joining us.

MCCAIN: Thank you, Wolf.

BLITZER: The surprised departure of President Obama's chief of staff. We're going to talk about that and more. Donna Brazile and Mary Matalin are standing by for our "Strategy Session."

And their grandfather is one of the richest men in the United States and their father is running for president. So why is the campaign low on cash right now?

The daughters of the Republican presidential candidate, Jon Huntsman, I'll speak with them live in the next hour.

(COMMERCIAL BREAK)

BLITZER: Let's get right to our "Strategy Session." Joining us our CNN political contributors, the Republican strategist, Mary Matalin and the Democratic strategist, Donna Brazile.

First to you, Donna. Bill Daley's sudden departure from the White House as chief of staff caught me by surprise. What do you make of this? DONNA BRAZILE, CNN POLITICAL CONTRIBUTOR: Well, I think Bill decided after Christmas, spending time with his family in Chicago and came back to the White House and he informed the president that this was perhaps a good opportunity for him to pass the baton on to somebody Jack Lew.

Jack has terrific experience inside Washington, D.C., State Department. He knows Capitol Hill. He knows the White House and he knows the budget. So I think it's a great time if you're going to depart and of course, this was a personal decision.

This is a good time because Jack will have the entire year to make sure that the president priorities are taken care of.

BLITZER: Mary, whenever they say they want to spend more time with my family you know there's something else going on. That sounds good, but there's really a lot more.

MARY MATALIN, CNN POLITICAL CONTRIBUTOR: Well, it doesn't necessarily mean that he was pushed out. With disclosure, I personally love Bill Daley. He helped my brother in Chicago through a health crisis literally, he saved his life.

But the changing of this chief of staff is pretty common, as Andy Cartner, the chief of staff in Bush W. year have often said that 18 months was the limit for that job. He was the record setter.

So I don't think this is in any way a distraction presuming they have a smooth transition, which I'm hard-pressed to see why they wouldn't. Jack Lew has been part of it and I'm sure Daley didn't leave anything in a mess so I think it's much ado about knotting.

BRAZILE: And, Wolf, remember you have -- Bill has Pete Ryles and our good friend, at least, David Pluff (ph) is over there. The 2011 was a very difficult year. Not only with the showdown with Capitol Hill, the capture of Osama Bin Laden, the debt ceiling debate and the Arab awakening.

This is an opportunity for the president to really have a fresh start in 2012, to, you know, hammer all the priorities that he has put forward for the American people.

BLITZER: Let's talk about Hillary Clinton for a moment. You might remember in early October, on our SITUATION ROOM blog, about the possibility that the president if he feels he needs to throw a Hail Mary pass I said in the spring or summer, and switch out Hillary Clinton for Joe Biden and put her on the ticket.

I wondered whether that was realistic or unrealistic. Robert Reich, the former Clinton labor secretary wrote about it last week. He thought it was a good idea. Now, Bill Keller, the former editor of the "New York Times" in today's op-ed page writes, "Even if Obama can win without Hillary, there's a lot to be said for running up the score. One reason Republicans did so well in the 2000 congressional elections that they overcame the gender cap that carried women voters 51-49.

Those voters will flock back to Hillary and more so if the Republican ticket is locked into a culture war agenda." First to you, Donna, is it all realistic? Do you think it's possible that the president might ask Joe Biden to go to the State Department and Hillary Clinton to be on the ticket?

BRAZILE: Well, I don't think so. Look, I know people have been talking about this for a long time. Not people inside the White House or not people inside Washington, D.C., Hillary Clinton has a tremendous fan base all across this country and I'm sure all across the world. She's been a terrific secretary of state.

I think she's doing a phenomenal job. You know, Joe Biden has done a tremendous amount of work for this administration. Not only with the dealings on Capitol Hill with foreign policy and domestic initiatives and helping a middle class family.

So I think we have the ticket that you're going to see on the Democratic side. Let's see what happens on the Republican side.

MATALIN: Mary, what would scare the Republican, whoever the Republican nominee is more, Clinton -- excuse me, Obama-Biden or Obama-Clinton.

MATALIN: It doesn't matter. Women left the Obama because of his policies. They are not going to flock back to policies they oppose intensely, particularly economic ones because women deal so much with those personal home budgets.

They're not going to flock back because there's a woman on the ticket and politically it would be awful for Hillary. She's the most popular woman in the world. Why would she want to anchor herself to a failing administration and a losing president?

BRAZILE: I have to fix Mary some red beans, Wolf. I mean, this has been a good administration. It's getting better every day. The economic numbers are looking better. I really do believe that Secretary Clinton is going to continue to be a plus, plus for this administration, of course, for the United States of America.

BLITZER: All right, guys, all of you know and a lot of our viewers know as well, we did lose a very good friend of all of ours, a friend of "THE SITUATION ROOM," this weekend, the political strategist and commentator, Tony Blankley died Saturday of stomach cancer.

He was a frequent guest on our program and a frequent guest on CNN. He was a speech writer and analyst for President Reagan and former press secretary for Newt Gingrich when he was speaker.

Tony is survived by his wife and three children. He was here in "THE SITUATION ROOM" sharing his views on Republican politics just a couple of weeks ago or so. Listen to this.

(BEGIN VIDEO CLIP)

TONY BLANKLEY, POLITICAL STRATEGIST: Talking about negative campaigning, if you don't have a strong positive piece of your campaign then the negatives bring you down. But Newt has a tremendous positive image of what he wants to accomplish. He's going to talk about lots of policies, lots of things that need to be fixed in big ways.

(END VIDEO CLIP)

BLITZER: He's 63 years old, very, very sad. We loved Tony a lot and I know that Donna, Mary, you want to say something, but Mary, first to you.

MATALIN: Politics aside, having worked with Tony for over two decades, he was a fine human being. You saw it right there in that cut. That was typical of him.

I don't remember any time in over two decades his having said anything negative or trash-talk anybody. He was a real gentleman and fine human being. Miss him.

BRAZILE: I agree with Mary. He was a gentleman, somebody fun to be especially in the green room because Tony was a former child actor. He was in "Lassie" and of course, when I met up with him in the green room. we would always talk about some of the old episodes.

The speechwriter for President Ronald Reagan and press secretary to Newt Gingrich, he was my editor when I wrote briefly for the "Washington Times" and more importantly, Wolf, he was just a fun person to be with.

He was not the kind of person that, you know, when you walk into the studio, you'll say, God, I'm in a room with Tony. You would be delighted to just sit down and just catch up on culture, politics and history.

This was one remarkable man and our deepest condolences to his family. His children, of course, and Tony also loved animals and so I just got to tell you. We lost a wonderful gentleman.

BLITZER: We certainly did. Let me just echo to both of you. Our deepest, deepest condolences to his wife, his three children, the entire family, all of his friends, we will miss him. Tony Blankley here in THE SITUATION ROOM.

After back-to-back debates, Jon Huntsman is showing new signs of strength in New Hampshire. I'll speak with his biggest advocates out there on the campaign trail. Three of his daughters!

(COMMERCIAL BREAK)

BLITZER: Deadly new sectarian violence in Iraq. Lisa Sylvester is monitoring that and some of the other top stories in THE SITUATION ROOM right now. Lisa, what's going on?

LISA SYLVESTER, CNN CORRESPONDENT: Hi, Wolf. Well, car bomb attacks have killed at least a dozen people in Baghdad today and wounded more than 50. The explosions rocked two predominantly Shiite areas of the capital according to the Iraqi Interior Ministry. Officials say the attacks are designed to reignite a sectarian war between the country's Shiite and Sunni Muslims.

And one of the newest Dallas Mavericks wasn't there when President Obama honored the team's championship at the White House today. Delante West said he was banned because of weapons' charges on his record, but the Secret Service disputes that saying West was on the list for entry. The Mavericks won't comment.

And passing out cigars is apparently passe for rapper Jay-Z. He is celebrating his new daughter with wife, Beyonce, by putting out a new song. It's called "Glory" recorded shortly after the birth of their daughter on Saturday in New York.

They named her Blue Ivy Carter. The song also revealed Beyonce and Jay-Z previously suffered a miscarriage. Jay-Z put "Glory" up on his web site today and hopefully, Wolf, we'll be seeing pictures of the new baby soon. That's what everybody is talking about. Where are the pictures of the new baby Blue Ivy Carter. That's her name -- Wolf.

BLITZER: I'm sure we will. Congratulations to the family. Thanks very much, Lisa.

With the New Hampshire vote hours away, South Carolina looming, Mitt Romney's rivals scrambling to stay in the race. Can Ron Paul become the anti-Romney candidate?

And they've given Jon Huntsman a boost on air on the campaign trail. I'll ask his daughters about his chances in New Hampshire.

(COMMERCIAL BREAK)

BLITZER: Jack Cafferty is back with "The Cafferty File" -- Jack.

CAFFERTY: Question this hour, Wolf, is how would you reform the political debate process?

HJ in St. Paul, Minnesota, "I think there should be real control over the time limits given to the candidates. I cannot stand when they go over the limit and tell the moderator, they, quote, "need to get one last point across."

The whole point of a debate is to give short, clear answers so we can understand their views. It's not so they can grandstand. So I say install microphone cut-offs."

Dave in Nashville, Tennessee, "Silly questions and some moderators aside, put those debates on a channel without commercials and let them last for hours longer to get real answers instead of sound bites."

And Pete writes from Florida, "The current Republican debate process has been absolutely invaluable providing detailed insights into the each of the candidate's ideologies, record positions and character, I don't care if it takes 100 debates as long as it prevents a pretender rising to the throne. Thank George W. Bush. Maybe more debates would have kept him out of the oval office."

Bill in New Mexico says, "the candidates would not be allowed to hear the response to the question by the other candidates. The candidate would not hear the question until it was his time to answer. All candidates will then answer the same questions. If a candidate does not or cannot answer the question, he would get a strike after two strikes, you're out of here." I won't read the rest of that. It's crazy.

Dwain in North Dakota -- I like this. "Make the politicians wear jump suits like NASCAR so the rest of us would know who their corporate sponsors are."

And Ed in Maryland suggests, "Hook them all up to lie detectors." If you want to read more on this, go to my blog, cnn.com/caffertyfile or through our post on THE SITUATION ROOM's Facebook page. I almost fell out of my chair -- Wolf.

BLITZER: We need you strong. Thank you.

The race for second place in New Hampshire. Why Ron Paul may be the biggest challenger to Mitt Romney right now. We're counting down to tomorrow's primary.

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BLITZER: Here's a look that the hour's "Hot Shots." In Nigeria, a man gestures during a protest against rising fuel prices. Impact is a man extracts almond oil in a market in Kurachi.

In England, a recently rescued seal pup looks over an outdoor pool. And in Germany, little boats made of newspapers placed on tables during a New Year's party in Hamburg. "Hot Shots," pictures coming in from around the world.